We wouldn’t rush to buy Carnival Industrial Corporation (TWSE:1417) before it goes ex-dividend

It resembles Carnival Industrial Corporation (TWSE:1417) will go ex-dividend in the next three days. The ex-dividend date is usually one business day before the record date, the cut-off date on which you as a shareholder must appear on the company’s books to receive the dividend. The ex-dividend date is important because the settlement process takes two full business days. If you miss that date, you will not be on the company’s books on the record date. So, you can buy shares of Carnival Industrial before July 25th to receive the dividend, which the company will pay on August 29th.

The company’s next dividend payment will be NT$0.20 per share, and over the past 12 months, the company paid a total of NT$0.20 per share. Last year’s total dividend payments show that Carnival Industrial has a trailing yield of 1.7% on the current share price of NT$11.60. Dividends are an important source of income for many shareholders, but the health of the company is crucial to maintaining those dividends. Therefore, we should always check that the dividend payments appear sustainable, and that the company is growing.

View our latest analysis for Carnival Industrial

Dividends are typically paid out of company income, so if a company pays out more than it earned, the dividend is more likely to be cut. Carnival Industrial paid a dividend last year despite operating at a loss. This may be a one-off, but it is not sustainable in the long term. Given the lack of profitability, we also need to check whether the company generated enough cash flow to cover the dividend payment. If cash income does not cover the dividend, the company will have to pay dividends from cash in the bank or by borrowing money, which is not sustainable in the long term. Last year, it paid out 17% of its free cash flow as dividends, which is conservatively low.

Click here to see how much profit Carnival Industrial has paid out over the last 12 months.

Have profits and dividends increased?

Stocks with flat earnings can still be attractive dividend payers, but it’s important to be more conservative in your approach and require a greater margin of safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Carnival Industrial reported a loss last year, and the general trend suggests that its earnings have declined in recent years as well, making us wonder if the dividend is at risk.

Many investors judge a company’s dividend performance by evaluating how much its dividend payments have changed over time. Carnival Industrial’s dividend payments per share have declined an average of 6.7% per year over the past 10 years, which is uninspiring.

We update our analysis of Carnival Industrial every 24 hours, so you can always stay up to date on the latest financial health here.

The summing up

Should investors buy or avoid Carnival Industrial from a dividend perspective? We find it a little uncomfortable that the company is paying a dividend while operating at a loss. However, we do note that the dividend was covered by cash flow. It’s not the most attractive proposition from a dividend perspective and we would steer clear of this company for now.

That said, if you’re still considering Carnival Industrial as an investment, you’ll find it useful to know what risks this stock faces. For example, we’ve identified 3 Warning Signs for Carnival Industrial (1 is a bit unpleasant) what you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a complete list of high yielding dividend stocks.

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This article from Simply Wall St is general in nature. We comment solely on historical data and analyst forecasts, using an objective methodology. Our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any shares and does not take into account your objectives or financial situation. We aim to provide you with a long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in the shares mentioned.

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